How Will Brazil’s Election Impact Financial Markets?

TALKING POINTS – Brazil Election, Emerging Markets, Trade Wars, US DOLLAR

  • Chaos and uncertainty about Brazil’s elections spooking emerging markets
  • Exposure of government corruption causing unpredictability ahead of vote
  • Stronger US Dollar and trade wars may trigger capital outflow from Brazil

RISK IN EMERGING MARKETS

Over the past few months, emerging markets (EMs) have been drowning in a tumultuous sea of uncertainty. The threat to global growth from on-going trade wars and rising US interest rates have stoked capital outflows, weighing on sector shares and currencies alike. The Turkish Lira plummeted more than 20 percent in August after the US hit its home country with sanctions. Cash-strapped Argentina requested early loan disbursements from the IMF, sinking the Peso. Meanwhile, South Africa entered recession and the economic outlook for the Philippines, Indonesia, and Mexico appears grim.

This has all been occurring against the backdrop of broader macroeconomic developments that have been steering markets toward risk aversion. President Trump’s economically nationalist policies has sparked trade wars with the EU and China, and threats are now being made against Japan. This comes on top of slow

Article source: https://www.dailyfx.com/forex/fundamental/article/special_report/2018/09/20/How-Will-Brazils-Election-Impact-Financial-Markets.html